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Ann paid $5,000 for a lot. Ann engaged Realtor and listed lot for sale for $10,000. Bob expressed interest in the lot. Since Bob is a dear friend of Ann's, Ann wanted to give Bob the lot. But Ann is, yes, in fact, an angel, and she also wanted the Realtor to make $3,000. So Ann gave Bob $10,000. (Ten thousand dollars.) Bob purchased the lot with the $10,000; and Realtor got $3,000 commission. Ann received $7,000. Ann then gave Bob the $7,000. (Seven thousand dollars.) So, of course, now Bob sells this lot, and if you thought that explanation was tedious, you should have heard Bob tell this (not her real name, and she's a hairdresser). Is Bob's basis $3,000? Because I think Bob's basis is $3,000.

One can either be angry or chuckle when a client tells YOU how to do a tax return. Just this week a client told me the cost of her teaching certificate was deductible as an employee business expense. I told her that went away in 2017, plus she isn't itemizing. Then she told me again it was deductible. She wanted to know what line a friend of hers should put her classroom expenses. I told her but then she said that wasn't the same as she read on the internet. I told her if she didn't trust me she could pick up her docs. I went from chuckling to testy.

@RitaBWow. I want an angel like that in my life. Can you introduce me to Ann and does she have any more lots? But to your question..... OK, you could say that Bob received 2 gifts from Ann ( 10K first, then 7K later). He used the 10K gift to purchase the property. Basis is 10K. Or, under the substance over form doctrine, Bob was gifted the property, in which case Bob gets the basis of the person making the gift. Basis is 5K. I don't get to 3K basis, how did you come to that conclusion? Not criticizing, just wondering what your thought process is to get to that number? Did I miss something? Tom Longview, TX

Previously, to receive a 1099-K from a third-party payment network, you had to exceed $20,000 in transactions for goods and services and have more than 200 business transactions in a year. So, for the 2022 tax year, that $20,000/200 transaction threshold applies. After 2022, the limit drops to $600. So many more people will get a 1099-K and the IRS will be looking for that tax payer to be reporting something. It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K. You must report on your income tax return all income you receive.

Yeah, I don't know what planet these people are living on, correct.

There were strings. It was understood that Bob was "buying" the lot, so realtor could get HER commission. Bob is also an angel, and she would never abscond with the dough. She would mess up my highlights, but never abscond with the dough.

Zero because she gave him the money to buy it, then gave him an additional 7K to boot!

Basis could be 0, 3K, 5K or 10K depending on how you look at it.

Personally, I think Bob's basis is zero and Ann should be claiming a $2000 gain.

Reporting by the 3rd party processor, NOT by the recipient, is changing. I keep seeing headlines about not having to report amounts under $600, but no mention of WHO is in the headline. The headlines seem to imply (clickbait) that the taxpayer will not have to report on his tax return. The taxpayer is, and always was, required to report worldwide income from all sources in all amounts on his tax return.

At least this is a start, but they're so far behind. "In a major step in the new Digital Intake scanning initiative, the IRS has already scanned more than 120,000 paper Forms 940 since the start of 2023, this is a twenty-fold increase compared to all of 2022. This effort will expand soon to include scanning of Forms 1040 as well as Forms 941. The scanning effort is part of a multi-form, multi-solution scanning initiative known as Digital Intake."

"This case joins one of my favorites in my tax class, Henry v Commissioner, which Paul Caron blogged about a couple of years ago. In that case an accountant attempted to deduct insurance and maintenance cost from his purchase of a yacht on which he flew a red, white, and blue pennant with the numerals ‘1040‘ on it. Henry, like Avery, failed to provide enough evidence to sustain the connection between obtaining clients for his accounting practice and his yachting, and the Tax Court disallowed those expenses as personal nondeductible expenses under Section 262." This has to be my all time favorite Tax Court case Years ago I had a long meeting with prospective clients who earned commissions as independent contractors selling merchant card services to various businesses. They made a substantial amount of money, enough that they purchased a Million $ Marathon Motor Home. They were Accountant shopping looking for someone who would agree to deduct their Motor Home as a business expense. They argued that when they drove their Motor Home to the Oregon Coast, they would visit current customers and prospect for new customers. When I explained to them why they couldn't do that, they left still shopping for an accountant.

Will we get interest? And a 1099INT? And a 1099MISC? Tom Longview, TX

Yes they should re-register in the new state, but until they do, they may well owe a partnership return to the old state.

Wow, so the realtor gets a 30 % commission?

Were any of the transactions contingent on any other transactions? Actual contract or implied contract? When Ann gave Bob $10,000, could he have moved to the Bahamas and never bought the lot? In other words, was it a gift with no strings attached? Then, you go through each step with your questions. One scenario has Ann filing a gift tax return for $17,000 and a $5,000 gain (less costs) on her 1040 plus Bob with a $10,000 basis. But, I can see all the other scenarios, also. Intent.

Yes, I originally thought Bob's basis was $10,000 as well, but then I started thinking the second gift should be subtracted. 10,000 - 7,000 = 3,000.

Most likely the extension will not accepted as an 1120S, I recommend paper filing the extension.

Reminded me of a potential client years ago. Demanded I give him the elderly/disabled credit (Sch R), because his old guy did it. Two years of prior returns, both included -0- on Sch R, 1040 also reflected NO credit, but he insisted. Good times! (Didn't there use to be one of those emoji things showing "beating your head against the wall"?)

I would take a look at it both ways. It looks like using the installment election your client would recognize about $2,000+ capital gain in 2022; and $18,000- in year 2029; vs recognizing gain of $20,000 in 2022. How would the extra $18,000 effect 2022 income taxes? Any capital losses or $0 percent capital gain bracket to consider?

If your client received one, I assume it was for over $20,000? The amounts have not been waived. If your client reports income for less than than the amount reported on the 1099 K, at the very least it will trigger a CP 2000. What was delayed for one year is the reporting of amounts greater than $600.

My experience with special needs adoptions have been that the children have some special need - emotional control issues, mental development issues, physical challenges. And in those cases, there was paperwork from the agency showing that this was a special needs adoption.

Before you go to a manger, you need to guide your client through the reconstruction of his mileage records. If he is in construction, he has records of jobs with dates worked, bills for supplies picked up etc. This auditor is bit over the top but her position is correct. If you don't push your client to reconstruct his records he will never learn the importance of keeping them.

I tell my clients to take pictures of everything they have that we put on the tax return. When they buy it, when they have major overhaul. And with vehicles a picture of the odometer at year end. Or if its a pick-up truck, and has to haul trailers, take a picture when the trailer is on and loaded. We had a logging company that had an Oscar Saw mill. Any quick google search shows you it's a piece of equipment, but our IRS auditor who lives in NYC thought it was a building and wanted to depreciate over 39 years. We sent a picture. "Down by the old, not the new, but the old mill stream..." Nope. If she keeps giving you a run around ask to bump up to the manager.

"We’re nearing the halfway point of this year’s tax season, which ends on April 18. 2.6% - The slight boost in number of returns filed at this point in the season, compared to last year 9.9% - The increase in number of returns already processed at this point in the season, compared to last year 98% - Portion of tax returns filed electronically this year so far"

My body can't wait to get away for a couple days. My brain is having a fit about it.

Ha, I plan to come in really early to get a couple of hours work in before they start. Then I'll take a nap and run some errands.

Sounds to me like they are now conducting all their business activity in state #2 and should re-register there.

Forced day off sounds like a welcome snow day for school kids. Enjoy it and sleep late.

You need to look up the filing requirements for BOTH the state of formation and any the state(s) in which they are operating. In general, that will determine the partnership's filing requirements and the K-1 information to be issued to partners. Those K-1s will alert the partners of possible state filings needed for the individual returns.

At least this year, we don't have all the stimulus and temporary incentives. Ah, but for me, my office building (a house converted to offices) had a water pipe burst several weeks ago, no interruption to my work but now they're having an electrical wiring test Friday, should take over half day, no power. I'll have to be out.

This tax season stinks so bad we're celebrating almost 1/2 way. Ugh. And I have to go out of town Thursday - Saturday to pick up my daughter who has been in Denver. And 10 more corps to go. Double Ugh. I feel those extensions coming on.

100% Tired of Taxes

It's March 1 now. Feb seemed to take long.